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Gold Prices Hit 1-Month High Following Weak U.S. Inflation Data Weakening the Dollar

 


Gold Prices Climb on Inflation Data

Gold prices surged to a one-month high during Thursday's Asian session, driven by a decline in the dollar and Treasury yields after softer U.S. consumer inflation data fueled speculation of lower interest rates this year.

The precious metal is nearing a breakthrough above $2,700 per ounce for the first time since early December, amid speculation that weaker inflation and a cooling labor market may allow the Federal Reserve to ease interest rates further this year.

However, gold's gains were limited by reduced safe-haven demand after Israel and Hamas agreed to a U.S.-brokered ceasefire. Uncertainty surrounding additional U.S. economic signals and the upcoming inauguration of President-elect Donald Trump on Monday also capped the dollar’s losses.

Market Performance

Spot gold slightly increased to $2,697.45 per ounce, while February gold futures rose 0.4% to $2,728.0 per ounce as of 12:01 WIB.

Gold Benefits from CPI Decline, Dollar Weakens

The gold rally was largely triggered by December's Consumer Price Index (CPI) data, which came in slightly lower than expected. While headline CPI met expectations, core CPI narrowly missed forecasts.

The report, which followed weaker-than-expected Producer Price Index (PPI) data a day earlier, bolstered speculation that easing U.S. inflation could give the Fed confidence to lower interest rates this year. The central bank is projected to cut rates twice in 2025, following four cuts in 2024.

Lower interest rates benefit gold by reducing the opportunity cost of holding non-yielding assets. Meanwhile, the dollar retreated from a two-year high after the CPI data but retained much of its gains over the past month.

Limited Gains Due to Reduced Safe-Haven Demand and Economic Data

Gold’s rally was tempered by diminished safe-haven demand, particularly after the Israel-Hamas ceasefire. The Middle East conflict had been a major driver of gold demand in 2024.

Broader risk-on sentiment, fueled by expectations of U.S. rate cuts, also weighed on the precious metal. Traders remain cautious ahead of key U.S. economic data, including retail sales and jobless claims reports due later today.

Other Metals Market Updates

Other precious metals showed mixed performance. Platinum futures dipped 0.1% to $948.15 per ounce, while silver futures rose 0.3% to $31.622 per ounce.

Among industrial metals, copper prices steadied following recent strong gains. Benchmark copper futures on the London Metal Exchange rose 0.3% to $9,192.50 per ton, while March copper futures remained flat at $4.3957 per pound.

All eyes are now on China’s fourth-quarter GDP data, set for release on Friday, for further insights into the world’s largest copper importer.

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